The recent recovery of BTC has rekindled the enthusiasm of investors, and in the developer circle, their building has never stopped for a moment, especially those project parties who are focusing on technology in one direction.
For example, Nervos Network (CKB), after launching the Bitcoin layer 1 asset issuance protocol RGB++ in the first half of the year, has now launched the CKB RGB++ Layer, which will not only ignite Bitcoin Finance (BTCFi), but may also drive all UTXO chains to take off.
Why do we say that? Let's take a look at what's going on. This article is mainly divided into the following aspects:
Why the primary market is optimistic about BTC Layer2
Why bet on UTXO
CKB RGB++’s disruptive nature and achievements
CKB RGB++ Layer Overview
RGB++ Layer Upgrade BTCFi Use Case
1. Why is the primary market optimistic about BTC Layer2?
After the fourth quarter of 2021, the primary market generally believes that BTC Layer2 will produce several unicorns in the next three years or so, just like Ethereum Layer2, which will bring a few years of craze to the market.
Why do you all think so?
1. BTC needs usage scenarios
The current market value of Bitcoin has reached $1.3 trillion, and it has always been used as a "value reserve", but this does not mean that BTC has no use cases. Before the third quarter of 2023, from the perspective of WBTC as a rare way for Bitcoin to flow into the DeFi field (then the market value was $11 billion, less than 1% of the market value of Bitcoin), the Bitcoin network actually had a large amount of asset liquidity that had not been released, and the native Bitcoin ecosystem had huge potential momentum.
2. BTC Layer2 market potential is large enough to reach a potential market value of $130 billion
Regarding Layer 2, there are a lot of industry-specific data, and the most successful one is ETH. Here is a rough example:
🔹Ethereum’s market cap is $400B, and Layer2s on Ethereum account for about 10% of that market cap, so the valuation is about $40B.
🔹Bitcoin’s market cap is $1.3 trillion, which means Bitcoin Layer 2 could have a market cap of $130 billion.
3. The consensus on developing Layer2 on BTC has been formed
After the Ordinals protocol came out, the concept of inscription became popular in just a few months, allowing people to see that it is possible to develop an ecosystem on BTC, and it has surpassed all smart contract platforms. From the fact that all smart contract platforms have inscriptions, it can be seen that where the community is, there is consensus.
2. Why bet on UTXO
1. Mainstream blockchain models
In the current blockchain world, there are two main ways of record keeping:
UTXO model (Unspent Transaction Output) and Account model. Bitcoin uses the UTXO model. This model is closer to cash transactions. For example, if you have a piggy bank and you receive money from others into your piggy bank, this money is the new coin in the piggy bank, which you have not yet spent (official term "Unspent Transaction Output"). Each coin in it can be regarded as a UTXO. When you are ready to use 10 yuan to buy a 6 yuan item, your change system will generate 2 new UTXOs for you, pay 6 yuan to the merchant, and give 4 yuan change to your piggy bank. (Understanding the UTXO model is the key to understanding RGB and subsequent content)
Account model, the Account model adopted by Ethereum. This is easy to understand, just like a bank account, how much balance there is, how much is transferred (consumed), the system only needs to track the balance changes of the user's account, this is the model adopted by most public chains at present.
Currently, the Account model has more advantages in programmability and flexibility; in simple business and cross-chain, UTXO has its very unique and pioneering advantages.
2. Current classification of BTC Layer2
According to incomplete statistics, by June 2024, more than 200 BTC Layer2s are under development or in preparation. The current categories of Bitcoin L2 solutions are roughly state channels (such as Lightning Network), side chains (such as Liquid, Merlin), Rollups (such as Rollkit), client verification (such as RGB, RGB++, Taro), etc.
These projects can currently be divided into two camps:
The EVM camp mainly refers to ETH's technology stack + bridge to solve BTC's expansion problem, which can be quickly built in the short term. Most BTC Layer2s adopt this solution.
The UTXO camp is a group of people who derive ideas based on the UTXO model, such as CKB, which proposed RGB++.
The EVM camp is more focused on using cross-chain bridges to transfer BTC and assets on the EVM chain to L2. Although this can greatly improve performance, it cannot achieve the security of the BTC mainnet. Simply using the POS mechanism requires more funds to activate. Once all the users who took advantage of the airdrop are lost, the project will be declared dead.
The UTXO camp belongs to a relatively original technical school. UTXO is the most distinctive data model of Bitcoin, so the Bitcoin Layer2 ecosystem is expected to present an ecological model different from that of Ethereum. Based on the UTXO architecture application, its security is naturally shared with the main chain. This model also brings a lot of expectations to the market. It is possible to build an ecological model different from that of Ethereum L2, which is also the expectation of the market.
The Nervos team has persistently chosen to extend and upgrade BTC's UTXO model, adopting a more native approach and modifying the UTXO model that supports Bitcoin. Inspired by the RGB protocol, the Bitcoin layer asset issuance protocol RGB++ was created to provide Bitcoin with Turing-complete contract capabilities without the need for a cross-chain bridge.
In the long run, CKB's chain-native characteristics and compatibility with underlying architecture innovations will allow it to go further in this BTC layer2 non-standard melee.
3. The disruptive nature and achievements of CKB RGB++
Nervos Network expands on Bitcoin’s core technology to power Bitcoin Layer 2 (L2) with a scalable blockchain — CKB
To improve the programming limitations of Bitcoin, Nervos Network adopts a customized model (Cell model) for state storage and a customized virtual machine (CKB-VM) to execute transactions.
CKB consists of a consensus mechanism based on proof of work (POW), a virtual machine based on the RISC-V instruction system, a state model based on Cells, a state-oriented economic model, and a peer-to-peer network.
What is RGB++?
Cipher, co-founder of CKB, creatively proposed the RGB++ protocol as a solution to the challenges currently faced by the RGB protocol - using a Turing-complete UTXO blockchain to solve the difficulties encountered by client verification in actual operations.
Since the launch of the RGB++ protocol on the mainnet in April 2024, the number of projects issuing assets on Bitcoin based on the protocol has surged. As a result, Nervos CKB's on-chain transaction activity has also increased rapidly. The number of new CKB addresses in April was close to 400,000, a month-on-month increase of 181%.
RGB++ is positioned as a Bitcoin layer-one asset issuance protocol, which means that you can use the RGB++ protocol to issue encrypted assets on the most secure and consensus-strong Bitcoin blockchain. After issuing the assets, you transfer the assets to others, and the recipient does not need to run the client for verification, because the assets issued through the RGB++ protocol will generate corresponding shadow assets on the CKB blockchain.
After understanding the above fundamentals, we can understand the CKB RGB++ Layer that CKB is about to launch recently.
IV. Overview of CKB RGB++ Layer
Recently, I saw on the media platform that CKB RGB++ will be upgraded to RGB++ Layer, extending the bridgeless cross-chain function and smart contract function to all UTXO chains.
What is the purpose of upgrading to RGB++ Layer?
1. CKB RGB++ Layer is the UTXO smart contract layer
After the upgrade, CKB RGB++ Layer further abstracts and expands on the basis of ensuring Bitcoin's native security and providing programmability, focusing on isomorphic binding with the UTXO model, and preparing to build an independent and universal UTXO smart contract layer.
Is it like reading a book from heaven? Actually, you can understand it this way:
CKB RGB++ Layer is a UTXO smart contract layer. Just like Ethereum’s smart contracts, data processing and L2 transactions will be aggregated here. After reaching this level, any UTXO chain in the future will use CKB RGB++ Layer as a smart contract layer, making BTC Layer2 more prosperous.
There are four important conditions for CKB RGB++ Layer to run:
UTXO
Smart Contracts
POW
Account Abstraction
On the RGB++ Layer, various RGB++ assets, such as Coin (FT) and DOB (NFT), are uniformly abstracted and have Turing-complete programmability. At the same time, users only need to use their original BTC wallet to seamlessly use various DeFi applications on the RGB++ layer.
2. RGB++ layer will gradually become a common asset layer
In addition to the smart contract layer, the RGB++ layer will also serve as the issuance layer for universal assets, realizing asset issuance based on smart contracts, allowing any assets on the UTXO chain to seamlessly enter the RGB++ ecosystem.
Based on native UTXO + account abstraction, it is possible to directly break the isolated asset islands, allowing various assets on the chain such as BTC, CKB, BSV, BCH to gain interoperability and achieve decentralized aggregation.
At the same time, RGB++ Layer has the parallel advantages of UTXO and the global state of account abstraction, allowing various DeFi protocols to obtain native and efficient implementation of the BTC ecosystem.
(III) RGB++ Layer will provide an independent blockchain browser
With this update of RGB++ Layer, the platform will provide an independent blockchain browser to view all assets and transactions on RGB++ Layer.
This function may seem insignificant, but we can understand it this way: a powerful public chain will have its own supporting system, among which the retrieval system and DeFi system are the core of the public chain.
The existing centralized indexer has various hidden dangers. Currently, RGB++ Layer uses CKB as the indexer, which is safer than the centralized indexer and can call smart contracts, which enhances composability. RGB++ has become a standard, clarifying how to write remarks, combine, and use on each UTXO chain. RGB++ Layer provides unified management of the state and provides interoperability. In the future, any chain can be used as its indexer based on the four conditions of RGB++ Layer.
From the perspective of such underlying technology, the goal of RGB++ Layer is to create a universal, cross-chain interoperable UTXO DeFi infrastructure and become a UTXO "financial port".
It may take only a few months for the UTXO chain to take off. Coins can be issued and communicated through RGB++, LTC, DOGE, and even BTC, and there are many ways to play.
5. RGB++ Layer Upgrade BTCFi Use Case
The first asset Seal based on the RGB++ protocol has been traded on UTXOSwap for some time. It is benchmarked against PIZZA. Its current market value is relatively low and not many people know about it. With later empowerment and value discovery, it is not impossible to benchmark against Orid.
What is the IBO model?
In this RGB++ Layer upgrade, the Seal community developed and operated the IBO (Initial Bitcoin Offering) tool platform, which will become the first IBO tool in the Bitcoin ecosystem and the launchpad for the entire RGB++ asset. Building a pool directly in UTXOSwap through smart contracts, as well as a series of other asset issuance and Defi gameplay are all based on smart contracts, which was not possible in the BTC ecosystem before.
Users who have played with launchpad know that launchpad basically empowers platform coins, locks seals and mines project tokens.
The IBO model is a new attempt. It is not like VC coins with low circulation, high valuation, and community rejection. It is also not like Fair Launch with 100% circulation, lack of motivation for the project team, or no team, and no plan after issuance.
IBO attempts to use high circulation, low valuation, and community-led to empower community holders from the beginning. The token model is between the VC model and the FL model.
It will be launched during the Bitcoin 2024 conference (July 25–July 27).
Summarize
BTC Layer2 is a trillion-dollar market. Currently, there are 200 projects that have issued coins or are in operation. Many of these projects are working on EVM. Although the development threshold is low and the start is fast, it is easy to have a wave of flow. After the airdrop users mine, withdraw and sell, the project tends to die.
Therefore, many visionary project parties are trying UTXO, and the most professional, longest-running, and most user-friendly UTXO is Nervos Network (CKB). After upgrading to RGB++ Layer, a universal, cross-chain interoperable UTXO DeFi infrastructure will be created, becoming a UTXO "financial port".
It may take only a few months for the UTXO chain to take off. Coins can be issued and communicated through RGB++, LTC, DOGE, and even BTC, and there are many ways to play.
references:
https://talk.nervos.org/t/utxo-account/2961
https://mp.weixin.qq.com/s/kUEY-OorWrUsHQw9zzdZAQ
https://www.wublock123.com/index.php?m=content&c=index&a=show&catid=47&id=24487
https://jackylhh.notion.site/10-RGB-3707284d8d874f8ab83bfc45aa19a406
https://medium.com/@ABCDE.com/cn-abcde-%E6%88%91%E4%BB%AC%E4%B8%BA%E4%BB%80%E4%B9%88%E8%A6%81%E6%8A%95%E8%B5%84utxo-stack-91c9d62fa74e
